Wealth for the World Donation Methodology

Wealth for the World donates two percent of its assets annually

The two percent distributions are offset by an expected annual return of 7 percent, so that the assets grow by about 5 percent annually despite the regular distributions. The resulting compound interest effect makes it possible to distribute more money in the long term than was originally donated into the fund.

The expected annual return corresponds to the historical inflation-adjusted global equity return.

The 2% distribution rate is calculated to maximize the total sum of disbursements over time. The calculation incorporates expected capital returns, the diminishing marginal utility of additional donations, and the risks of delayed payments.

You can find our model for calculating the optimal donation rate here.

It was developed in collaboration with the economist Stefan Pauly and is based on the research of Philip Trammell from the Global Priorities Institute (University of Oxford).

With an annual distribution rate of two percent and an expected real market return of seven percent, the donation payments and the asset development (= impact) of donations to Wealth for the World can be calculated:

The projections above are based on expected returns. How would the fund have performed historically? Our backtest simulates the fund's performance using real MSCI World data since 1970:

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Disbursement method until 2023: From 2016 to 2023, 70% of the fund's annual return was donated. As this method was not optimal in the long run, we changed the disbursement method in 2024. More details in our Annual Report 2023.

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